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The Federal Trade Commission (“FTC”) recently announced that the dollar-based thresholds applicable to the Hart-Scott-Rodino (“HSR”) premerger notification program will be raised from the 2010 levels. The HSR minimum threshold will be raised to $66 million from $63.4 million, due to the increase in the gross national product. Transactions valued between $63.4 million and $66 million will no longer require an HSR filing. In addition, the tiered filing fee dollar thresholds will be similarly revised resulting in lower filing fees for certain transactions.
Simultaneously, the FTC also increased the thresholds prohibiting any person from holding positions as an officer or director of competing corporations engaged in commerce, if the corporations meet certain thresholds.
HSR Thresholds Raised
The HSR premerger notification program applies to large transactions involving large parties engaged in commerce. The HSR Act provides that transactions valued at in excess of $200 million (as adjusted) are reportable regardless of the size of the parties. Transactions valued at in excess of $50 million (as adjusted) are reportable only if the acquiring and acquired persons meet the “size-of-person” test—either the acquiring or acquired person must have annual net sales or total assets exceeding $100 million (as adjusted) and the other party must have annual net sales or total assets exceeding $10 million (as adjusted). Acquired persons not engaged in manufacturing relying on the $10 million (as adjusted) test must meet it on the basis of assets alone.
The 2000 amendment to the HSR rules requires that the FTC annually revise the HSR thresholds, based on the change in the gross national product. Since the increase in the minimum HSR threshold from $15 million to $50 million in 2001, the HSR thresholds had been gradually increased to their previous 2009 high of $65.2 million before falling for the first time in 2010 to $63.4 million. This year, the adjusted threshold results in a new high of $66 million.
The chart on the previous page summarizes the changes to the thresholds resulting from indexing.
The revised HSR thresholds will take effect on February 24, 2011. The revised thresholds will apply to all transactions that close on or after the effective date of the revised thresholds.
Revised Rules for Interlocking Directorates
Section 8 of the Clayton Act generally prohibits a person from serving simultaneously as a director or officer of competing corporations engaged in commerce if each competing corporation has capital, surplus, and undivided profits aggregating more than $10 million (as adjusted). The interlocking directorate prohibition does not apply if either corporation’s “competitive sales”—gross revenues for all products and services sold by one corporation in competition with the other—are less than $1 million (as adjusted). As with the HSR thresholds, the FTC must annually revise the interlocking directorate thresholds based on the change in the gross national product. The revised thresholds have similarly increased above their 2010 levels, and will also take effect on February 24, 2011.
The FTC has raised the adjusted $10 million threshold to $26.867 million, from its previous level of $25.841 million, and has raised the $1 million threshold to $2.6867 million, from $2.5841 million. This represents a 4.1% increase from the 2010 thresholds. The thresholds decreased in 2010 by 1.2%, and like the HSR thresholds, had increased in each of the three previous years.
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You can access the press release announcing the indexing changes to the HSR thresholds and the interlocking directorates thresholds by clicking on the link below. From the link to the press release, you can access the official announcement by the FTC. Links to our summaries of prior indexing announcements are also provided below.
Changes to the HSR Rules Benefit Filing Parties (January 2006)